Senate Democrats call for an end to oil industry tax breaks

Counting on voter anger at rising gas prices, Senate Democrats on Tuesday began another effort to end what they called subsidies for major oil and gas companies. Sen. Robert Menendez, D-N.J., proposed legislation that would eliminate $2 billion worth of tax incentives he said oil companies don't need with profits high and the worldwide price of a barrel of oil at well over $100.

View full sizeRick Bowmer, The Associated Press archiveSen. Robert Menendez, D-N.J., says oil companies don't need tax incentives with profits high and the worldwide price of a barrel of oil at well over $100.

Menendez would use some of the savings to finance alternative energy sources.

According to Menendez, the Big 5 oil companies reported combined profits of $137 billion in 2011. Nearly $2 billion of that was from taxpayer subsidies. For every 1 cent increase in gasoline prices, the Big 5 makes $800 million more in annual profits, he said.

But like a similar Democratic proposal last year, the legislation is unlikely to get the 60 votes needed to advance through the Senate. Almost all Republicans are expected to oppose the bill, aided by at least three Democrats led by Sen. Mary Landrieu, D-La.

"The bill from Sen. Menendez is a wrong-headed approach that pits sectors of the energy industry against one another in an effort to assign blame for high gas prices, instead of promoting the all-of-the-above energy strategy our country needs," Landrieu said. "I support alternative, renewable energy, but the advance of this sector cannot come at the expense of the oil and gas industry that powers our nation and supports more than 9 million jobs in the United States and more than 375,000 in Louisiana."

Landrieu said "demand from emerging economies like China and India are driving up gas prices, not our domestic producers, and raising taxes on this sector -- which is what the Menendez bill would do -- would only increase gas prices even more."

Sen. David Vitter, R-La., spoke on the Senate floor to denounce the Menendez bill.

"Obviously, it's economics 101 that if you tax something more, the price at the pump, the price at the market, goes up, and you get less of it," Vitter said. "But even if that weren't so obvious, we have history to look at, and there's a very clear history lesson from the Carter years when this same experiment was actually enacted. Back then, in 1979, it was the windfall profits tax."

But Sen. Harry Reid, D-Nevada, said it is silly to continue tax incentives that were intended to spur production when prices were low. He is expected to bring the Menendez bill to the floor during the next several weeks.

On the campaign trial, while Republicans are blaming President Barack Obama for high gasoline prices, especially what they say is his failure to increase domestic drilling, the president has lit into oil companies for profiting at a time of high deficits and high gas prices.

Obama said when the Senate votes on legislation to repeal tax breaks for the oil industry, it will give voters a chance to see whether senators are willing to "stand up for oil companies or stand up for the American people."